When asked about this, Buffett explained that Berkshire is now effectively too big to invest in those great, low-capital businesses.

In other words, Berkshire Hathaway has too much money to manage. They HAVE to make capital intensive investments simply because they have so much capital to place.

Buffett has made this observation before, that size can be a barrier to high investment returns.

In an interview with BusinessWeek in 1999, Buffett almost bragged saying:

“The highest rates of return I've ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It's a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.”

But Berkshire Hathaway today is a $350 billion company, and elephants don't gallop.

Buffett's success as a capital allocator over a period of more than fifty years has clearly paid off for his longstanding shareholders.

But perhaps his most impressive achievement has been the transparency with which he's discussed how he did it, primarily through his annual shareholder letters.

Buffett educates anyone who's willing to learn about his value investing approach, encouraging everyone to ignore irrational markets and buy high quality assets as inexpensively as they can.

This brings up the question of size once again.

Value investing almost by definition is limited in terms of asset size and subsequent investment capacity.

If you have $350,000 to invest, you have the pick of the finest publicly-available value investments on the planet, no matter how small the market.

If you have $350 billion, you're relegated to expensive railroads and government bonds.

That's why the most disciplined value investors make a conscious decision to cap the size of their funds in order to concentrate on maximizing investment returns.

Simply put– smaller investors have a considerable advantage… if you know where to look.

So where is the most compelling value opportunity today?

First, you need a market or sector that has been out of favor for years.

If all the talking heads on business TV networks are screaming BUY BUY BUY, or touting the new ‘hot' sector, that's the place you want to avoid.

Next, look for a market that has been largely shunned by both domestic and foreign investors. Buy what other investors hate, especially when that emotion is based on ‘feeling' rather than concrete data.

Once you've located the right market or sector, then seek attractive, bottom-up valuations, i.e. low price/earnings and price/book ratios.

One example is the resource sector.

As commodities prices have fallen dramatically, the market capitalizations of many small mining companies (including several profitable ones) have been pushed below their net cash levels.

Most of these companies have market valuations of $100 million or less.

For individual investors, it's easy to buy shares. But institutions like Goldman Sachs or Berkshire Hathaway that have tens of billions to invest are simply too large to get in on these deals.

Japan is another great example.

Mikahil Gorbechev was still running the Soviet Union the last time Japan had a major financial boom. Investors hate Japan.

And yet, company valuations in Japan are incredibly attractive, especially the ‘mid-cap' companies that are similarly too small for most institutional mega-investors.

As Greg Fisher, manager of the Halley Asian Prosperity Fund, points out, Japanese stocks have two key catalysts to growth:

First, many Japanese companies know their market valuations are “ridiculous” and are acting on that through stock buybacks and rising dividends.

Second, the dividends paid by Japanese companies are becoming increasingly attractive in an environment of negative interest rates.

In Japan, owning a stock yielding 5% is preferable to paying negative interest to the bank.

Both of these should have the effect of pushing up share prices considerably.

There are many more examples around the world: Vietnam, Russia, agricultural property in certain markets, etc.

The larger point is to ignore the mind-numbing conventional investment wisdom and expand your universe.

There are substantial opportunities in the world for educated value investors. And right now, we as individual investors have a tremendous advantage.

Author: Sovereign ManSimon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.